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What You Need to Know About Working with Franchise Brokers

Franchise brokers can help guide qualified franchisees to the right brand, but sometimes at a cost. Here’s the inside scoop on franchise brokers and how to get the most out of working with them.

With nearly 4,000 franchise brands currently recognized by the International Franchise Association, franchising is a dynamic and diverse industry that some people need help to navigate. This role is filled by franchise brokers — intermediaries who function as a matchmaker of sorts for franchisors and franchisees. 

“It’s a huge educational process,” said Emily Anderson, a FranNet consultant. “Most people don’t know franchising, so it’s a huge win for me when I can get them to think beyond the $5 footlong and the golden arches, and I see the lightbulb go off when they realize what’s possible.”

Franchise companies hire brokers to sell franchises for them, so the franchisors and the franchise candidates are considered clients. Brokers either work for a network or for themselves and represent a set number of franchises trying to find the best candidates. 

“There are thousands of franchise systems out there, so having someone who can help candidates do the proper research and gather data is a big part of the due diligence process,” said Corey Elias, founder of Franchise Captain, an Atlanta-based franchise brokerage. “Brokers know all the systems out there, and we have back-end data on what those systems look like and can ultimately help people narrow down and find the franchises that will be the right fit for them.”

Brokers are experts on franchise opportunities in the marketplace and are able to tailor a potential franchisee’s options based on their interests and values. Brokers have access to funding resources, franchise attorneys, accountant introductions and tools to look at the back-end health of a franchise system. 

In order to play matchmaker, the broker will get to know each candidate, asking fundamental questions about finances, geographic preferences and professional history, as well as digging a bit deeper to truly understand why their client is interested in franchising at all.

“I worked with a coach at FranNet during my due diligence process,” said David Houck, who signed on as a Home Clean Heroes* franchisee last year after decades in the banking industry. “He walked me through a series of conversations about my strengths, my weaknesses and my passions. It really helped me put into words what gets me out of bed in the morning, and we developed a great friendship.”

Once the broker has a better understanding of the candidate, he or she will start the search process to find the best franchise match. The broker and candidate will review options together and gradually filter down the list. Once it’s narrowed down to the final few, the broker will facilitate discussions between the franchisor and the candidate to move things along to the next step, all the way through to signing. This usually includes walking a candidate through the Franchise Disclosure Document (FDD) and the Franchise Agreement (FA). The process repeats and continues until there’s a match.

The services provided by a brokerage are also helpful for the franchisor, as they can filter out any buyers who are simply browsing, not serious about their investment or not qualified to make one. Franchisors also need to be selective when looking for a franchise broker. Brokers are representing the brand to a potential buying audience, and brokers will likely be just as selective when choosing brands to work with.

“The benefits of working with brokers, unlike many sales organizations, is that they bring franchisors very qualified prospects,” said Linton Dowling, marketing director at Raintree*. “They’ve met with them and really understand their needs as a franchisee. On the other side, the best brokers understand the quality traits that the brand is looking for in an ideal franchisee. These candidates will meet all requirements, such as availability, location and financial prerequisites.”

Franchisors need to understand that the role of a good broker is to introduce qualified leads to the brand. Once the introduction is made, it’s the franchisor’s job to sell and to take the candidate through a well-developed discovery, sales and closing process. There’s no point in generating a ton of qualified leads if brands don’t have capable individuals to guide them through to the finish line.

Because brokers don’t charge franchisees for their services, franchisors will be charged a percentage of the franchise fee when they make a sale. Franchise brokers’ commissions vary, but typically they are paid up to 50% of an initial franchise fee that could range between $30,000 and $50,000. In other cases, franchise brokers are paid a flat rate. 

Still, Elias says it is important to remember that franchising is a highly referral-based business, which means brokers are incentivized to create great matches.

“My last 30 clients have signed on with 25 different brands — I’m not just recommending the same brand to everyone,” said Elias. “It requires a lot of digging to understand the individual’s goals and pair them with the right brand based on a whole slew of factors — we leverage our real-world experience to help prospective franchisees better evaluate the systems, the FDDs and the red flags. I own three businesses myself, so I understand ownership. Having that experienced guidance is priceless.”

As with any profession, some brokers are better than others, and the franchises they represent will vary. Some may represent larger, more well-known brand names, and others may have a portfolio of smaller, mid-range franchises. That is why potential clients (both franchisees and franchisors) need to talk to multiple brokers so they can cast a wide net and make sure they’re seeing all of the options. 

Charlie Bever, CFE, Senior Franchise Consultant with The Entrepreneur Authority, says the very best franchise brokers capture and understand their candidates’ buyer values and then match their values against what the franchise offers.

“Not all franchise brokers are the same,” said Bever. “The best franchise brokers are a ‘coach’ — someone who is debriefing with the prospect all throughout the franchisor's discovery process. Providing the prospect with knowledge and firsthand experiences and being a one-stop-shop for them for resources while they complete their due diligence, is key. That is why it is just as important to do your research when selecting a franchise broker.”

Read more about working with franchise brokers below:

*This brand is a paid partner of 1851 Franchise. For more information on paid partnerships please click here.